US investment giant BlackRock and other investors in SpiceJet (SG, Delhi Int’l) have expressed concern over the airline’s corporate governance practices and “substantial accounting irregularities”, the financial daily reported. Indian Mint.
BlackRock voted against reappointing audit committee member Shiwani Singh – the wife of SpiceJet chairman and chief executive Ajay Singh – when the airline sought shareholder approval on December 30 for re-election as director. A second resolution requested the adoption of the last accounts for the financial year ending in March 2021.
“Vote against the member of the audit committee (Shiwani Singh) due to material accounting irregularities for which we believe the audit committee bears some responsibility,” BlackRock summed up voting against, according to documents seen by Mint. The New York-based multinational also voted against the resolution to adopt the financial statements “due to serious reservations from the auditors”.
Just over half of institutional shareholders reportedly voted against renewing Singh’s term and just under half voted against accepting the financials. However, both resolutions were eventually approved as Ajay Singh and his family own 59.46% of the company and retail shareholders own another third.
Three other non-Indian investors, Legal & General Investment Management of the UK, American Century Investments of Kansas City and State Street Global Advisors of Boston, also voted against both resolutions, according to documents disclosed by Mint. Legal & General noted that it downvoted because auditors had “expressed concerns” about SpiceJet’s accounts.
In mid-2020, auditor SR Batliboi & Associates LLP questioned SpiceJet’s status as a going concern given the steady erosion of the airline’s net worth over previous years.
Walker Chandiok and Co, the carrier’s auditor for the 2021 accounts, has acknowledged compensation of INR 5.6 billion rupees (USD 74.5 million) from Boeing for losses suffered as a result of the grounding of the B737 MAX in as other income, before the funds have been received, according to Mint.
Approached for comment, a SpiceJet spokesperson told ch-aviation: ‘This vote relates to an annual general meeting held on December 30, 2021. The reasons for the ‘no’ vote expressed by said foreign portfolio investors are best known to them because they never requested any clarification from the company on the accounts for the 2020-21 financial year or on the appointment of the administrator. In fact, these investors did not even attend the annual general meeting during which the company answered various questions from investors.
“Nevertheless, there is only one caveat that was mentioned by the auditors and that is due to a difference of opinion between the views of management and the auditors regarding how and when the compensation for the manufacturer of the grounded 737 MAX aircraft must be accounted for. These are not financial irregularities and this has been transparently disclosed by the company with full disclosures at all relevant times. In fact , management’s view on said qualification has been disclosed and filed with the BSE [formerly Bombay Stock Exchange] June 30, 2021.”
Editorial Comment: SpiceJet comment added – 11.02.2022 – 08:30 UTC